A former Treasury adviser warned yesterday of serious flaws in the government measure of inflation that have left millions out of pocket and masked the true scale of plunging wages.

Dr Mark Courtney said there was no statistical case for the switch from the retail price index (RPI) to the lower consumer price index (CPI) - now used to calculate social security payments, public-sector pensions and pay rises.

An average 0.9 per cent gap between the two measures was "entirely" because of an underestimation of real price rises under the CPI, he warned.